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Fact or fiction: What investors need to know — and do — about the affordable housing market in China

by Benjamin Cole

China, as with every modernising nation before, now faces a fundamental urban challenge: how to provide affordable housing for lower- and middle-class people, particularly in a way that enhances commuting and quality of life. In China’s 12th Five-Year Plan unveiled in 2011, the emerging giant set a goal of 36 million affordable housing units built by 2016, financed by US$800 billion in outlays. Critics say the programme is smaller than advertised and often corrupt. Though never monolithic, so far China is choosing formats that offer scant opportunities for institutional investors and developers, and may start emphasising affordable rentals over for-sale housing. But, things can change.

Urbanisation in China has translated into population density, and density has meant higher land prices in major metropolitan areas. And higher property values in urban settings are usually attended to by other complications, such as increasingly scarce land that is suitable for reside